Medical Device Link.

Originally Published MX March/April 2005

BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT

Investors get involved in day-to-day product development operations and problem solving in various ways—some not at all. The investors consulted for this article offer several perspectives on when and how to weigh in.

Generally, investors restrict themselves to board-level activity. "We're not operators," says Tom Dickerson, chairman of Tullis Dickerson & Co. (Greenwich, CT). "We rely heavily on management." Investor and board member Mike Carusi, a general partner at Advanced Technology Ventures (Palo Alto, CA), seconds Dickerson. "It's not our role to micromanage the management team. It is our role to make sure that the team has set clear timelines and objectives, and to monitor how the team performs against those objectives." Says Allan Ferguson, East Coast operations managing director of 3i Corp. (Palo Alto, CA), "As a value-added investor, we try to give advice and counsel where we have an opinion that will matter. We don't second-guess the management team every step of the way. Knowing when not to meddle is important."

"When we look at an investment, we're looking at backing management," says Adele Oliva, a partner in Apax Partners (New York City). "The primary contact is the CEO, although we build relationships with other members of senior management. The way we work is to provide contacts, as well as giving management thoughts and ideas and being a sounding board for strategies." Dickerson agrees, noting that, if the company appears to be headed down the wrong path, investors working with the management team to get the project back on track need to have insight into all levels of senior management. "One of the challenges," he says, "is to get below the level of the CEO without undercutting the CEO. If the venture capitalist can do that, he or she gets tremendous comfort that the company is heading in the right direction, as well as great input as to the resources that need to be brought to bear to help the company."

Investors may join the management team in brainstorming particular problem areas. Of particular value is the relevant experience from which they can draw in recommending consultants or clinicians and in suggesting different clinical or regulatory strategies that might solve the problem. When outside resources are necessary, investors may know which contractors are likely to be useful and which have poor track records.

General partner Gary Shaffer of Morgenthaler Ventures (Menlo Park, CA) is perhaps a more hands-on investor than the others quoted. "I do get involved in advising teams about their progress in research and early-stage engineering," he says, "although in the end it's usually the management team's decision whether and how to proceed with an engineering program. Advice is situational. I'll sometimes nudge the team to slow down in certain critical steps, or I'll encourage them to use additional expertise and resources. I track schedule and budget fairly tightly, on a monthly basis."

Investors do want to be kept informed of progress, and they want honest appraisals, with no surprises later. Shaffer concludes, "I typically spend quite a bit of time on product-development reviews, either separately or as part of the board meetings."

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